College of LAS « Illinois

Economics

High Social Costs of Gambling

The spread of casinos may harm local economies.

Owing to the widespread expansion of casinos, the cost of pathological and problem gambling has soared to nearly half the annual cost of drug abuse in the United States, reports an LAS expert in gambling.

The social costs of gambling, such as increased crime, lost work time, bankruptcies and financial hardships faced by the families of gambling addicts, have reached epidemic proportions, costing the economy as much as $54 billion annually, says economist Earl L. Grinols. This compares with the estimated annual $110 billion cost of drug abuse, according to the U.S. General Accounting Office.

Casino gambling causes up to $289 in social costs for every $46 of economic benefit, according to Grinols. Although industry-sponsored studies on gambling ballyhoo the new jobs and increased taxes, Grinols points out that the benefits of casinos are regional. Those that primarily serve tourists, such as in Las Vegas, may create jobs and an inflow of revenues. However, in the Midwest and South, where casinos primarily attract a local clientele, gambling causes a net loss to the community. Not only do out-of-state casino operators remove gambling dollars from the local economy, but local employers and taxpayers must foot the bill of increased crime, personal bankruptcy, domestic violence, lost workdays, child abuse and other social costs from problem gamblers.

"In 2003 dollars, the cost to society of an additional pathological gambler is $10,330, whereas the cost to society of an additional problem gambler is $2,945," he says. "Accounting for the cost of raising tax dollars to cover some of these costs raises the totals to $11,304 and $3,222, respectively."

Put differently, says Grinols, "The cost of problem and pathological gambling are comparable to the value of the lost output of an additional recession in the economy every four years."

What is more, it is the 10 percent of the population who gambles regularly that accounts for up to 80 percent of the wagers in casino enterprises. This means that the gaming industry's profits are based on a relatively small number of addicted gamblers who run up huge costs to themselves, their families, and society.